Firm to Pay $16.7 Million to Settle Allegations of Withholding Profits From Clients

LONDON—Foreign-exchange trading firm FXCM Inc. FXCM -1.30% agreed to pay fines and refunds totaling almost £10 million ($16.7 million) to settle allegations by a U.K. financial regulator that the company withheld profits from clients and failed to inform British authorities that it was under investigation in the U.S.

The Financial Conduct Authority said that U.K. units of FXCM withheld £6 million from customers on foreign-exchange transactions between August 2006 and December 2010. The regulator said the broker pocketed profits when exchange rates moved in its customers’ favor while a trade was in process, but it passed on losses that occurred on other trades.

FXCM, which is based in New York and is publicly listed on the New York Stock Exchange, is a dominant broker in online foreign-exchange trading for retail clients and serves banks, hedge funds and other asset managers. The company in 2012 sought to boost its institutional-trading business by investing in, and trading with, an electronic-trading platform called FastMatch, in partnership with Credit Suisse Group AG CSGN.VX -0.73% . In trades with retail customers, FXCM matches orders electronically with quotes from more than a dozen banks and other so-called market-making firms, including high-frequency-trading firms. FXCM earns a “markup,” or fee from clients based on trading volume, according to the company’s description of its business.

As part of its settlement with the British regulator, FXCM agreed to pay £4 million in fines plus almost £6 million to refund money to U.K. clients.

In a statement, FXCM played down the impact on customers as “typically very limited,” with individual traders suffering an average hit of $3.70 apiece because of the practices over the four-year period addressed in the settlement.

“It’s not like this was a major source of profit,” FXCM Chief Executive Drew Niv said in an interview Wednesday, adding that FXCM operated similarly to competitors when it pocketed price improvements instead of crediting customers. FXCM changed its practices in 2010 to pass along those price improvements to customers, Mr. Niv said.

“This is how the system was set up. As far as we were concerned at the time, the customer traded with us, and we hedged,” Mr. Niv said. “The only thing we held back on was the price improvement. We still gave the customer the best price out of multiple market makers.”

About the FCA agreement, Mr. Niv said, “The idea of a settlement is I don’t argue with it.”

The FCA said the fine wasn’t related to any continuing probe into allegations that traders at banks and other institutions attempted to rig foreign-exchange markets.

FXCM said it had provisioned $15 million in the third quarter of 2013 for this matter. “All clients receiving restitution will be notified within 60 days,” the company said. FXCM’s U.K. customers who lost more than $1 as a result of its practices will be reimbursed to their accounts.

The FCA became aware of the practice in 2011. But it was unaware that U.S. authorities had begun their own probe into the matter a year earlier. In 2011, FXCM agreed to pay more than $14 million to settle allegations from U.S. market regulators that the company had failed to supervise customer accounts. As a result, regulators said, FXCM customers suffered detrimental pricing on trades.

FXCM’s failure to alert the FCA breached requirements that businesses be open and cooperative with the U.K. regulator. “I’m not contesting that,” Mr. Niv said, adding that an FXCM executive at the time responsible for informing the British regulator mistakenly “thought he had.”

Everyone is invited, and welcome to join. I recommend logging on about 7:55pm London time.

If you haven’t attended one before, this will be a new experience for you. I normally offer these as a live trading coaching experience for my delegates, who already understand the signals we are looking for to find strong setups.

Because of this, the webinar is more focused on scanning all the charts, looking for a signal. It’s fast, or will seem that way for most newbies.

To start off with, please understand that I will be scanning every Forex and Stock chart to check Monday night’s daily bar. I will then determine if it is a reversal, Doji, Low-test, High-test, outside, inside, or even double-inside bar setup. If it is one of these, then and only then, will I proceed to evaluate it further, and assess the validity of it as an actual desirable trade.

In order to keep it very safe, I will only be focusing on trending setups, but will highlight reversal setups for the Master Traders if any good ones are there.

All trades are taken with 1% risk, or less, and if several setups occur on the same currency pairs, the recommendation is to either select one of them, or divide up the 1% risk over all of them, mainly in order to manage our risk.

Profit can be taken with a limit order at a 1:1 target, and trailing using daily 10 pip trailing stop.

If you do not understand any of the terminology I’ve used in this email, you must book yourself in for coaching with me as soon as possible! Let me repeat that- book yourself in for coaching with me as soon as possible.

Contact katie.lewis@learntotrade.co.uk and ask for any assistance you may require.

Further coaching sessions can be ordered from me, at a discounted rate, if need be.

I’m very much looking forward to seeing you online tomorrow night!

In the meantime, there are currently setups on the following charts, for tonight, please evaluate against your own trade strategies:

I might pop over socially myself- I’ll be hanging with an old trader friend of mine, Zaheer Anwari- who is also a writer for the Huffington Post, and a very good long-term trader. His profile is at the bottom of this link, and I’ll be promoting some of his best articles on trading in other posts.

Based on the weekly uptrend, and the recent daily double-bottom, this is an aggressive entry into the daily trend, on the 240min timeframe. The entry is buying on a cluster level where Fib levels, moving averages, Weekly pivots, horizontal levels all lie on top of each other, with the stop placed below that, then manage and update the stop on the daily or 240min. Adam

The 120min chart has already given a very bullish signal, and so the trend might not even come back to test this level.

Here is the link to view the setup of the explanation- it’s about 14 minutes long.